"What do you do in a place like Hawke's Bay when somebody from Wairoa has to come down to the hospital in Hastings? Do they pay a pillow tax?" he asked.
Mr Baines said while accommodation was an "enabler" of economic activity, it was only a small part of the total tourism sector's turnover, dominated by retail spending, along with spend on food and beverages, transport and activities.
He said a pillow tax would be a blow for Hawke's Bay motel operators who had been struggling since 2007. After several years of decline, accommodation spending in the region had begun to pick up over the past year as a result of hard work done by Tourism Hawke's Bay, he said.
"In saying that, there's an awful lot of catch-up to be done on the past six or seven years. People are retiring debt, doing deferred maintenance and deferred capital purchase. There's an awful lot of reinvestment," he said.
"So even if there's an increase in turnover, it doesn't mean there's an increase in profitability because it's being reinvested back into the businesses. You need at least three or four years or solid profitability in Hawke's Bay before the industry becomes robust again."
Retired businessman and former Napier City councillor John Harrison said Labour's proposal to allow a pillow tax and other levies such as a regional petrol tax would "stuff the economy".
Motel owners would "go broke" while councils such as Napier City used the levies to pay for facilities such as the MTG cultural building, he said.
"In addition to that, they will have the ability to tell the local petrol stations to add another 10 or 20 cents a litre, which goes to the Napier City Council as well to fund their tourism assets."
Napier City Council chief executive Wayne Jack said such a levy had not been considered.
"We would be unlikely to consider it because it would be detrimental to the tourism industry and in fact the growth of Napier and Hawke's Bay."
Napier Mayor Bill Dalton also dismissed the idea.
"Napier is a city that relies heavily on tourism and tourism is incredibly important for the whole of Hawke's Bay. Why would we undertake some sort of process that was a deterrent to people coming to Hawke's Bay? It simply defies logic."
Hastings Mayor Lawrence Yule, who is president of Local Government New Zealand, said a pillow tax was likely to be one option considered by the association was part of a broad review it was undertaking into how councils are funded.
"I imagine it will be something that is considered by that working group. We've made no decision as to whether it will be included or not but it is a funding mechanism."
Mr Yule acknowledged the accommodation industry strongly opposedthe idea and that they felt they were an easy target for councils when it came to revenue collection.
"On the other side of that, a lot of councils provide a lot of money to tourism in the regions of New Zealand in the way they don't provide money to other businesses," he said.
Mr Nash said yesterday if such a levy was introduced it would be up to councils to work with affected industries to ensure it was done successfully.
"There is no element of compulsion whatsoever, it just gives the councils one more option to consider when they're looking at how to pay for essential services," he said.
